Cutting the BBC

No surrender

The corporation will become smaller, but no less potent

ON MARCH 2nd the BBC did something unprecedented: it volunteered to cut itself down to size. The broadcaster wants to abolish two digital radio stations, shrink its website and spend less on imported shows and sport. Mark Thompson, the director-general, says he will abandon the goal of churning out more and more programmes to suit every taste. Commercial media firms, which have been complaining for years about the BBC's heft, did not know what to make of it. Is the world's first, and mightiest, national public broadcaster turning modest?

Not a bit of it. The report signals an important retreat from the policy of all-out expansion that has guided the BBC in recent years. But it is a pragmatic, limited retreat that will allow the corporation to marshal its forces elsewhere, in products and places where it can be more effective. “Every organisation goes through phases of expansion and consolidation,” says Claire Enders, a media analyst. “This is the consolidation phase.”

There is a lot to consolidate. Each week 98% of adults in Britain use a BBC service. Its website receives 20m British visitors a month, according to ComScore, a firm which keeps tabs on these things. That is a third of the population—around the same as the proportion of Americans who log on to Facebook. Although people gripe about paying a “licence fee” of £142.50 ($214) per home for the BBC, they accept it as part of the landscape. It is a reflection of public faith mainly in the corporation that television newsreaders are trusted to tell the truth by 63% of Britons, according to Ipsos MORI, a pollster. The police and civil servants are less trusted, politicians and other journalists much less so.

British television is not the best in the world, as is often claimed (the best of American TV drama, for example, is much better), but it is remarkably good for a smallish country. And the BBC produces much of the best stuff. The rough handling of Mr Thompson on Newsnight, a BBC programme, on March 2nd was just one example of the strength of its news operation. Its natural-history programmes are world-beating. In the past few years BBC Worldwide, the corporation's commercial arm, has launched cable channels and invested in studios around the world, greatly expanding the BBC's footprint.

Its income is guaranteed, and rising. The BBC took £3.5 billion from the licence fee last year. Worldwide chipped in another £1 billion in revenues. Meanwhile the advertising slump has hit other free-to-air broadcasters hard. ITV, once hugely profitable, is struggling. Channel 4 is downright sickly; so is Five. BSkyB, a satellite broadcaster and telecoms outfit, is now the BBC's only serious rival. And only in some ways—not in original scripted programmes, for example.

The growing financial gulf between the BBC and its commercial competitors is a problem for both sides. Magazine publishers and radio stations complain about unfair competition for audiences and advertisers. Rival broadcasters complain about the high prices paid for talent: Jonathan Ross, a popular presenter who will leave the BBC this summer, was reportedly paid £18m over three years. Newspapers point out that the presence of a giant free news website makes it hard to charge for online content. Similar complaints forced ZDF, a German public broadcaster, to prune its website drastically last year.

James Murdoch, who runs News Corporation's European and Asian operations, including BSkyB, has called the corporation's reach “chilling”. Other broadcasters say the same thing privately. Yet here is an odd thing about the BBC. Whereas to rivals the corporation seems enormous and fast-growing, it has long seemed to those inside as though its reach is shrinking.

Over the past decade multichannel television has exploded in Britain. Some people have stumped up for cable and satellite TV but more have opted for Freeview, which decodes free digital signals sent over the airwaves. In 2000 just 31% of homes had multichannel TV, according to the British Audience Research Board (BARB). These days fully 88% do. As people acquire more choice they drift away from the BBC's main channels (see chart above).

This drift is uneven. The old have been slowest to acquire multichannel television; when they do get it, they tend to plump for the most basic offerings with the fewest channels. They have mostly stuck with the BBC. The young and middle-aged face many more temptations, from both pay-TV channels and other free-to-air broadcasters. It may be weak, but ITV is still better at youthful, popular television than the BBC. So the corporation's audience is narrowing. The BBC reckons it accounts for 46% of all TV viewing by skilled and professional workers aged 55 and over. It makes up just 23% of the viewing by working- and lower- middle-class viewers between the ages of 16 and 34.

Public space for what, exactly?

If the BBC were a commercial outfit this would be fine. MTV does not fret that its audience is made up largely of teenagers, nor does Vogue worry that its readers are mostly affluent women. To the contrary: niche audiences are more valuable to advertisers. But because the BBC is paid for by everybody it must try to serve everybody. As young audiences have deserted its main television channels the corporation has been obliged to make aggressive efforts to win them back. “It's in the DNA of the licence fee,” says Mark Oliver, a former strategy director for the BBC who now runs Oliver & Ohlbaum, a consultancy.

In the past ten years the corporation has launched digital television channels such as BBC Three, home to programmes like “Freaky Eaters” and “Hotter than my Daughter”, and the highbrow BBC Four. It has built a vast website, including pages that are specifically aimed at teenagers. But the most concerted efforts to recover lost audiences have been in radio. In 2002 the BBC introduced 1Xtra, a digital urban-music station that bore a suspicious similarity to Xfm, a commercial outfit. It followed up by launching 6 Music, an alternative-rock station, and the Asian Network. The stations received plenty of promotion on the corporation's television channels.

Launching a radio station is a cheaper way of increasing reach than launching a television channel, but it is still not cheap. In the financial year 2008-09, 6 Music spent £6.5m on programming (and £9m in total) to reach an average weekly audience of 600,000. That ratio would spell ruin for a station that depended on advertising revenues. “They are spending more than twice the money to reach half of the audience we achieve,” says Clive Dickens of Absolute Radio, a commercial station that plays roughly the same kind of music.

And 6 Music, which was slated for closure this week, is not the most spendthrift of the lot. The BBC Asian Network, which will also be abolished, spends as much to entertain a radio listener for an hour as BBC One spends to entertain a television viewer for an hour. With the exception of CBeebies, a channel for young children, all of the new digital TV offerings cost more per user than BBC One (see chart below). That ought to put even Mr Ross's astronomical salary into perspective.

One might think, Mr Thompson says, that the BBC should redouble its efforts to improve such offerings so they can attract bigger audiences. The decision to close them instead reflects what he describes as a new way of thinking about the BBC's place in the media landscape. The corporation should stop launching services where perfectly good free alternatives exist. Instead it should focus on strengthening its core channels so they appeal to more people and please them more intensely.

Smaller and stronger

If this sounds like a ceasefire proposal to commercial media, it is nothing of the kind. Mr Thompson says the BBC will not restrict itself to areas where the market has failed. Instead it will act as a guardian of what he calls “public space”. Like a library or a national museum, the BBC will make sure high-quality programming and information is available to all free of charge. Its role is not just to fill gaps in the market but to create a common culture (which means, for example, keeping a free news website even if others insist on charging). Far from retreating, the BBC is defining its remit more broadly, and digging in. Indeed, it is quietly building new fortresses.

The most important new redoubt is broadband television. In 2007 the BBC launched iPlayer, an online television- and radio-streaming service. Thanks in part to heavy marketing it has been a roaring success, and particularly with those elusive young folk. In January iPlayer received 120m requests for television and radio shows. Although such things are hard to measure precisely, it is likely that the BBC's share of broadband television viewing is considerably greater than its share of ordinary television viewing. The iPlayer, which is slick and well-engineered, turns out to be a better way of extending the BBC's reach than narrowly targeted TV and radio networks.

In partnership with other broadcasters and BT, the BBC is now developing a system that would bring broadband-delivered television to the living-room set. This would put the corporation at the heart of an entire new approach to distribution, giving it enormous influence. Although the new system should be able to incorporate a way of charging people for pay-TV programmes, such things are likely to be add-ons to an essentially free service. BSkyB, which derives most of its income from subscriptions, has spotted the danger. If the new service is a success, it may come to be seen as an even greater intervention in the market than anything the BBC has done so far.

Politicians remain an irksome problem. Ministers cajoled the corporation into setting up a new governing body, the BBC Trust, only to complain that it was the wrong outfit for the job. They prodded the corporation to move many of its operations to Salford, Manchester's less-fashionable neighbour, and then complained about how much was being spent on the buildings. They encouraged the corporation to expand online and then groused that it was not spending enough on original television programming.

Yet the BBC is popular, and an election looms. Ben Bradshaw, the culture secretary, has been a staunch critic of the broadcaster in the past. This week, however, he called the corporation a “great British asset” and accused the Tories of being “viscerally hostile” to it. The Tories were not prepared to concede that point. Ed Vaizey, who speaks for the Conservatives on cultural matters, reportedly revealed that he had spent the weekend listening to the doomed 6 Music. He described it as “brilliant” and expressed the hope that it would be saved. With enemies like these, who needs friends?